Friday, June 29, 2012

To
close out the month and the first half of 2012, I thought that I'd close on a
bit of a "lighter" note, particularly as we are entering the summer
bathing suit season. You'll see, as you read on, my very weak use of a pun in
the opening sentence.

A
research article entitled "The weight of nations: and estimation
of adult human biomass" estimates the world's human biomass, how it is
distributed across the globe and how much of the human biomass is due to
obesity. For those of you without a science background, biomass is defined as "the total mass
of organisms in a given area or volume". In this case, the authors
of the study looked at the total mass (weight) of human organisms on earth.

For
each country, the authors of the research paper used data on body mass index
(BMI) and height distribution from the World Health Organization to calculate
the average adult body mass which was then multiplied by the population (using
2005 population data) to get the total human biomass. Because height and
BMI data was not available for some countries, approximately 40.7 million
adults were excluded from the study, a rather insignificant omission
considering the world’s total population. The authors also estimated the
percentage of the population that is both overweight and obese and how much of
the global biomass results from obesity.

Scientists
know that humans require more energy to move a heavier body. As well,
when humans are at rest, energy requirements increase with body mass due to an
increase in metabolic activity. The authors note that there is an
increase in global demand for food arising from an increase in body mass and
that this contributes to higher food prices.

Now,
let's look at the results. In 2005, the total human biomass was
approximately 287 million tonnes with average global body mass of 62 kilograms
or 137 pounds. Biomass due to overweight humans (5 percent of the
population) was 15 million tonnes, the equivalent of 242 million people of
average body mass. Biomass due to obesity (1.2 percent of the population)
was 3.5 million tonnes, the equivalent of 56 million people of average body
mass.

Which
area of the world had the highest body mass? North Americans have an
average body mass of 80.7 kg (178 pounds) with more than 70 percent of the
population being overweight. It only takes 12 adult North Americans to
make up one tonne of human biomass. North America has 6 percent of the
world's population but 34 percent of the world's total biomass due to obesity!

Which
area of the world had the lowest body mass? Asians have an average body
mass of 57.7 kg (127 pounds). It takes 17 adult Asians to make up one
tonne of human biomass. Asia has 61 percent of the world's population
by only 13 percent of the world's human biomass due to obesity.

Here
is an interesting table showing the heaviest and lightest 10 nations:

Japan
has an average BMI of 22.9. If all nations in the world shared this BMI,
the total human biomass would fall by 14.6 million tonnes or 5 percent of the
total. As a result, the biomass due to obesity would fall by 93 percent.
The United States has an average BMI of 28.7. If all the nations in the
world shared this same BMI, the total human biomass would rise by 58 million
tonnes, a 20 percent increase. As a result, the world's biomass due to
obesity would increase an astonishing 434 percent and would result in an
increase in energy requirement (i.e. food) equivalent to that consumed by 473
million adults.

Why is any of this relevant? The authors suggest that
increasing human biomass will have important implications for global resource
and food requirements and will ultimately impact the world's ecology since food
production goes hand-in-hand with carbon emissions. As well, the authors
note that since the world's average BMI is rising, the impact on the world's
food resources could become critical in the future.

Thursday, June 28, 2012

If
you've been awake over the past few months, you're aware that the world,
particularly Europe, is suffering from a rather uncomfortable debt situation. As
I posted here, it is going to be an uphill battle
for the world's advanced economies to reduce their rapidly growing debt levels;
the Bank for International Settlements (BIS) recently stated that to
bring government debt-to-GDP ratios back to Great Recession levels, it will
take 20 consecutive years of surpluses exceeding 2 percent of GDP! The
odds of that - slim at best and most likely nil.

Earlier
this year, the Congressional Budget Office released an interesting paper
entitled "Sovereign Debt in Advanced Economies: Overview and Issues
for Congress"
by Rebecca Nelson. In this paper, Ms. Nelson notes that the high levels
of debt among the world's advanced economies are a new global concern that has
erupted out of the 2008 - 2009 global financial crisis. As we have seen,
governments are embarking on fiscal austerity programs in a last ditch effort
to get their books in order, however, some economists note that these measures
may well undermine the very weak global economic recovery, now into its third
year. As one would expect from a non-science science, other economists
argue that current government austerity measures do not go far enough to rein
in burgeoning debt loads, particularly as most developed nations will be
experiencing top-heavy population trees.

How
does all of this fit into the mandate of Congress? There are two factors
to consider:

1.) Is
it likely that the U.S. is headed for a Eurozone-type debt crisis? Current bond interest rates
would suggest that this is unlikely, however, looking back five years, one
would have never suspected that the PIIGS sovereign bonds would be suffering
from interest rates in excess of 6 percent.

2.) What
impact will Europe's debt crisis have on the United States economy? Slower growth in advancing
economies could impact trade between America and its main trading partners. As
well, in September 2011, direct U.S. bank exposure to Greece, Ireland and
Portugal reached $55 billion, leaving their balance sheets somewhat vulnerable.

Let's
start by looking at several graphs from the report. The first graph shows
the changes in the gross public debt levels for the G-8 nations since the end
of World War II:

The
sovereign debt level for the G-7 rose from 84 percent of GDP in 2006 to a
forecasted 119 percent of GDP in 2011, a 42 percent increase in just five years.

The
second graph shows the gross government debt for both advanced economies and
developing economies between the year 2000 and 2010, projected forward to 2016:

Sovereign
debt levels for the G-7 economies rose from 84 percent of GDP prior to the
Great Recession to 114 percent of GDP in 2010 and are projected to rise to 127
percent of GDP by 2016, an increase of 51 percent over 10 years. In sharp
contrast, debt levels in developing economies fell from 52 percent of GDP in
2002 to 39 percent of GDP in 2010 and are projected to fall even further to 29
percent of GDP by 2016, a decrease of 44 percent over 14 years.

Here
is a graph showing the variation of gross public debt among advanced economies
in 2011:

Here
is a graph showing the variation of net public debt among advanced economies in
2011:

Please
keep in mind that the difference between gross and net public debt statistics
refer to that particular government's financial assets which are subtracted
from gross public debt to give us net public debt. In the case of Japan,
its gross public debt in 2010 was 220 percent of GDP but, thanks to large
assets, its net public debt is "only" 117 percent of GDP. In
sharp contrast, Greece's gross government debt and net government debt were
both 143 percent of GDP in 2010 since the Greek government has no assets.

What
kind of measures would be required to get this debt problem straightened out? Here
is a graph showing the fiscal cuts that would be necessary to reduce debt
levels to 60 percent of GDP by 2030 for the world's advanced economies:

To
help you understand the preceding graph, let's look at the United States. Please note that a primary budget
surplus is the budget balance excluding interest owing on the debt. The U.S. would have to achieve a
primary surplus of 5.1 percent of GDP by 2020 and sustain it through to
2030 to achieve the 60 percent debt-to-GDP goal. In 2010, the primary deficit
was 8.9 percent of GDP. This means that the total fiscal cuts
necessary for the United States to achieve the 60 percent debt-to-GDP goal would be equal to 11.3 percent of GDP relative to the 2010 primary balance (deficit) or just under $1.7
trillion, the third highest among advanced economies after Japan and Ireland
and just ahead of Greece. Now that's painful austerity!

On
average, the world's advanced economies would have to reach a primary budget
surplus of 3.8 percent of GDP by 2020 and sustain it through to 2030 to achieve
the average 60 percent ratio. Currently,
the advanced economies are running a primary budget deficit of 4.8 percent of
GDP meaning that, to reach the target of 3.8 percent surplus by 2020, the
average fiscal adjustment will have to be 7.8 percent of GDP.

With
this data in mind, why does the United States seem exempt from the wrath of the
world’s debt market? The saving
grace that is currently preventing the United States from becoming the next
Greece, Portugal or Ireland is the fact that its currency is the world's choice
for its reserves. As well, generally strong economic growth has kept the
debt wolves at bay. That said, here is a graph showing how quickly Spain saw the yield on its 10 year bond
rise from under 4 percent to just over 7 percent:

Basically,
we cannot say that the interest rates on U.S. federal debt will never rise
rapidly. At some point, the world's bond traders may simply lose
confidence in the ability of the American government to continuously grow its
debt, particularly if there is a repeat performance from Congress over the debt
ceiling.

To summarize, the solution to the world's sovereign debt
issues look rather daunting. As we've seen in Europe, the imposition of
what have been until this point relatively modest austerity measures have
resulted in both social upheaval and the tossing out of incumbent governments. The
world's economy is already showing signs of slipping back into negative growth
even with the very modest measures taken. There is one thing that I think
we can count on; the next recession will be different than the recession that
the world experienced in 2008 - 2009. Since sovereign debt levels were
not at the sky-high levels that we are seeing today prior to the Great
Recession, we are entering uncharted fiscal territory. The next global
downturn could well be "The Big One".

Tuesday, June 26, 2012

The
Bank for International Settlements or BIS has recently released its 82nd annual report for the year 2011. As you may recall, BIS is an
intergovernmental organization of the world's central banks located in Basel,
Switzerland; in other words, it's the central bank for the world's central
banks. Scattered throughout this rather large document are a few gems
that I would like to include in this posting since, surprisingly, the
mainstream media pays very, very little attention to what BIS has to say.

BIS
opens by noting that the global economy is still struggling with the legacies
of the financial crisis and that "vicious cycles are hindering the
transition for both the advanced and emerging market economies". Not unexpectedly, the
world is experiencing a two-speed recovery; rather unexpectedly, this time
things are different because it is the world's "advanced" economies
that are suffering from lagging economic growth while emerging markets are
seeing their share of the world's economic growth rising as shown on these graphs:

The
economies that were at the centre of the 2008 - 2009 financial crisis are still
experiencing that splitting hangover headache from the collapse of their
respective real estate booms and their excessive household debt levels. BIS
states that household debt levels remain close to 100 percent of GDP in several
countries including Ireland, Spain and the United Kingdom. Accompanying
high household debt levels is the problem of highly leveraged governments and
financial sectors that are very slow to improve the problems on their balance
sheets, particularly in the world's developed economies.

This
has left the world's central bank system stuck between a rock and a very hard
place. Over the year that was 2011, central banks increased their
purchases of government bonds in an effort to shove stubborn interest rates
down right along the yield curve as a last ditch effort to prod the world's
reluctant economy back to life. At this point in time, the total
assets of the world's central banks stand at $18 trillion (and growing), a
level that is roughly 30 percent of global GDP. As I have posted before,here are a handful of graphs showing
how central bank balance sheets have grown and the assets that they hold:

BIS
points the fickle finger of fate at government inaction for backing the world's
central banks into a corner as average government deficits have risen from 1.5
percent of GDP in 2007 to 6.5 percent in 2011 and debt has risen from 75
percent of GDP to more than 110 percent in the same timeframe. To
bring government fiscal situations back to pre-crisis levels, it will take 20
consecutive years of surpluses exceeding 2 percent of GDP just to bring the
debt-to-GDP levels back to pre-Great Recession levels. To put it mildly, that is
about as likely as pigs learning how to fly between now and 2032. Unfortunately,
as I have said before, central banks have been their own worst enemies in some
ways; their ultra-cheap credit has led the ruling class around the world to
believe that they can continue to accrue debt at breakneck speed with no
repercussion. Here are two graphs showing the sharp contrast between
interest rates for the world's advanced and emerging market economies showing how
cheap credit is for what turns out to be the world’s most indebted economies:

Here's
what BIS has to say about where the fault lies (all bold is mine):

"The
extraordinary persistence of loose monetary policy is largely the result of
insufficient action by governments in addressing structural problems. Simply put:
central banks are being cornered into prolonging monetary stimulus as
governments drag their feet and adjustment is delayed. As we discuss in Chapter IV, any
positive effects of such central bank efforts may be shrinking, whereas the
negative side effects may be growing. Both conventionally and unconventionally
accommodative monetary policies are palliatives and have their limits....In
fact, near zero policy rates, combined with abundant and nearly unconditional
liquidity support, weaken incentives for the private sector to repair balance
sheets and for fiscal authorities to limit their borrowing requirements. They
distort the financial system and in turn place added burdens on supervisors.

With
nominal interest rates staying as low as they can go and central bank balance
sheets continuing to expand, risks are surely building up. To a large extent
they are the risks of unintended consequences, and they must be anticipated
and managed. These consequences could include the wasteful support of
effectively insolvent borrowers and banks – a phenomenon that haunted Japan in
the 1990s – and artificially inflated asset prices that generate risks to
financial stability down the road. One message of the crisis was that central
banks could do much to avert a collapse. An even more important lesson is
that underlying structural problems must be corrected during the recovery or we
risk creating conditions that will lead rapidly to the next crisis.

In
addition, central banks face the risk that, once the time comes to tighten monetary
policy, the sheer size and scale of their unconventional measures will prevent
a timely exit from monetary stimulus, thereby jeopardising price stability
(i.e. inflation). The result would be a decisive loss of central bank
credibility and possibly even independence."

Not
that a loss of central bank credibility hasn't already happened!

When
talking about "wasteful support of effectively insolvent...banks"
perhaps BIS need look no further than the bailout of the banking systems of
Spain, Ireland, Greece, Italy and many other nations.

Here
is a graphic from the report showing the "vicious cycle" that the
world's central banks are trapped in today:

Lest
those of us who live on the west side of the Atlantic get cocky, in closing,
here is an interesting comment from the annual report:

"Over
the past year, much of the world has focused on Europe, where sovereign debt
crises have been erupting at an alarming rate. But, as recently underscored
by credit downgrades of the United States and Japan and rating agency warnings
on the United Kingdom, underlying long-term fiscal imbalances extend far beyond
the euro area."

BIS' annual report for 2011 paints a rather grim but quite
realistic picture of what lies ahead for the global economy. What is particularly
concerning is that the outlook is so grim three years into the
"recovery". Unfortunately, it likely means that the next global
economic downturn will be even more painful than the Great Recession since, in
many ways, the economy never recovered from the last crisis.

Sunday, June 24, 2012

Updated August 2013With
turmoil in Egypt once again making headlines, I thought that it was time to
take a brief look at one of Egypt's main sources of foreign exchange, its oil
industry. Since this is an important part of Egypt's economy, it could
also be the focus of actions by various parties in any civil uprising.

Egypt,
while not benefitting from the massive reserves of oil that its Middle East
neighbours possess, has a remarkably old industry. Oil was first
discovered in Egypt in 1869 and production began in 1910. A joint venture between BP and
Shell called Anglo-Egyptian Oil explored for and produced oil from 1910 until
1964 when the Egyptian government nationalized its reserves. Egyptian
General Petroleum Corporation was founded by the Egyptian government in 1962
and is resposible for all sectors in the Egyptian petroleum industry, holding
the sole rights to import and export all petroleum products. As well,
EGPC maintains a joint venture will all other foreign parties investing in
Egypt's oil industry. Egypt's government also created EGAS or Egyptian
Natural Gas Holding Company in 2001 to manage foreign investment in exploration
for natural gas and the use of LNG infrastructure. One of EGAS's mandates
is to prove additional natural gas reserves through intensive exploration.

Until
2009, Egypt actually exported much of its oil, however, that has changed as
domestic energy demand has increased. Here
is a graph showing how much oil Egypt has
produced in BOPD for the last 30 years ranking 26th place in the world:

Here
is a graph showing how much oil Egypt has consumed in BOPD for the last 30
years:

Here is a graph showing how much oil Egypt has imported and exported over the
last 30 years:

Lastly, here
is a graph showing Egypt's proved reserves of oil in billions of barrels:

Notice
how the proved reserves dropped markedly in the mid-1990s and have never really
recovered as Egypt's production ramped up along with its consumption as shown
above.

Egypt's
energy growth story will be on the natural gas side of the business as shown in
the following graphs. Here
is a graph showing Egypt's natural gas production pattern over the last 29
years:

Surprisingly,
Egypt is actually the world's 12th largest natural gas producer and the growth
in its production profile is not showing any signs of slowing down.

Here
is a graph showing Egypt's domestic natural gas consumption pattern over the
last 29 years:

Here
is a graph showing Egypt's natural gas imports and exports since 1999 showing
how natural gas exports are growing:

Egypt
exports most of its natural gas to Lebanon, Jordan and Syria through the Arab
Gas Pipeline and to Israel through the Arish-Ashkelon pipeline addition. As well, Egypt is the world's 13th largest exporter of liquified natural gas (LNG). Egypt exports LNG to the United States (160 BCF in 2009), representing
35% of U.S. imports of LNG and 35% of Egypt's LNG exports. Other
recipients of Egypt's LNG are Canada, France, Spain, Mexico and Asia. Egypt's largest LNG partnership is partially foreign-sponsored by Petronas and Gaz de France and construction of the LNG facilities has brought in $2 billion worth of investment into Egypt's economy.

Lastly,
here is a graph showing Egypt's proven natural gas reserves and how they have
grown over the past three decades:

Egypt's
natural gas reserves now rank 19th in the world. Most of Egypt's natural
gas reserves are found in the Natural gas now provides 49 percent of
Egypt's total energy consumption, more than oil which provides 45 percent. Natural
gas is used to produce 70 percent of the country's electricity generation needs
with the remainder being supplied by hydro-electricity.

One
of the most critical aspects of Egypt's oil and gas industry is its control of
both the Suez Canal and the Sumed Pipeline. Total petroleum transit
volume through the Sues Canal reached 2 million BOPD or five percent of all
seaborne oil transports in 2010. The Sumed Pipeline, an alternative to
the Suez Canal, has a capacity of 2.3 million BOPD and flows across Egypt's Western Desert from the Red Sea
to the Mediterranean coast. If political issues were to result in closure
of both of these transportation bottlenecks, oil from the Middle East would
have to travel an additional 6000 kilometres around the southern tip of Africa
to reach markets in Europe and the Americas. This would prove problematic
although not unsolvable.

Only time will tell how quickly and quietly Egypt solves its
ongoing political crisis. It is interesting to see that Egypt's oil and
natural gas industry is a major part of its foreign trade; an aspect that could
prove to be a point of vulnerability for Egypt's next government if civil
strife erupts.

Thursday, June 21, 2012

Recent
data releases regarding the state of the job market in the United States have
been sending mixed messages about the economy. The headline U-3 jobless
number seems to be intransigently set above 8 percent and the weekly jobless
claims numbers seem to be bobbing around the 370,000 to 380,000 range as shown
on this graph from FRED:

While
this is well off the highs seen in 2009, it most certainly doesn't look that
healthy when we compare it to the levels seen during past recoveries,
particularly the recovery between 2001 and 2008 when initial claims dropped to
the 300,000 to 320,000 range as shown on this longer term graph:

Whatever
could be the problem? Perhaps the answer lies in the JOLTS data released by the Bureau of
Labor Statistics which shows us the number of job openings available to jobless
Americans. Here is a graph
showing the total number of non-farm jobless openings from 2001 to the present:

You'll
notice that the number of job openings plummeted from a peak of 4.69 million in
June of 2007 to a low of 2.186 million in July of 2009 during the depths of the
Great Contraction, a drop of 53.3 percent. Since then, the number of job
openings has slowly but surely increased, however, it is still well below the
levels experienced during the period between March 2006 and September 2007 when
it was above 4.4 million every month except two. In fact, the April 2012
level of 3.416 million jobs is reminiscent of the levels seen back in 2004 and
is still between 20 and 25 percent lower than the average just prior to the
Great Recession. It is also interesting to note that the current level is
still well below the levels seen at the beginning of the new millennium
where, during the recession in 2000 - 2001, job openings remained above 3.5
million every month.

As
well, in recent months, the number of job openings seems to have stalled around
the level of 3.5 million which was achieved back in September 2011. What
is even more concerning is the 9 percent month-over-month drop from 3.741
million in March 2012 to April's 3.416 million level.

Very few job openings in that sector too, particularly when one considers that during peak
periods, between 240,000 and 260,000 job openings existed for construction
workers, up significantly from the current level of 80,000.

While
things have picked up significantly since the bottomless pit of the Great
Recession, openings in April 2012 dropped to 246,000, down 20 percent from the
previous month where openings hit a post-recession high of 308,000. Keep
in mind that we must keep this data in perspective; looking back to the early part
of the millennium, manufacturing job openings exceeded 440,000 when this
data was first recorded.

Actually,
this graph
may help explain some of the issues facing those who manufacture things for a
career:

Apparently,
America just doesn't make things any more, either that, or it takes a whole lot
less Americans to make what we actually do consume.

Apparently,
it would appear that the jobs simply are not there, explaining why unemployment
seems intransigent and why some Americans just don't feel like the Great
Recession ever ended. Despite the endless Bernanke Twist'n'Ease, the
employment sector of the economy just isn't firing on all cylinders.

Tuesday, June 19, 2012

As
someone who follows the world's bond market relatively closely, over recent
months, I have noticed an interesting trend in European bond yields and have
seen yields that I would never have thought possible. I'm going to let
several charts do my writing for me, noting that all charts follow the changes
in yield over the past 3 years.

Now,
let's look at the contrasting yields on several non-PIIGS European bonds:

Here
is the chart showing the yield profile for 2 year German bonds which actually went negative in late May/early June and where they have been for two weeks:

Here
is the chart showing the yield profile for 2 year Swiss bonds which are currently well into negative territory where they have been for weeks:

Here
is the chart showing the yield profile for 2 year Danish bonds which are also in negative yield territory:

Lastly,
here is the chart showing the yield profile for 2 year Finish bonds which are sitting at a tiny fraction of a percentage above zero:

If
we exclude Ireland, there seems to be a very strong north-south split. It's
also interesting to see investors' desperate "flight to security"; their
willingness to pay to have a nation hold onto their funds for two years and get
less back in the end is nothing short of astonishing!

Here
is a chart showing the debt, debt-to-GDP profiles for the aforementioned
countries current to the end of 2011 according to Eurostat (except Switzerland as linked here):

Germany is definitely getting a pass on its high debt level because of its strong economy, however, that could change if interest rates rise and their debt continues to climb as they are forced to bailout their neighbours.

Since
all European nations are sharing a common currency, technically, they should
all be sharing similar interest rates, a situation that was the case until the
beginning of the Great Recession as shown here:

Even though bond interest rates have moderated for Spain, Italy and Greece in recent days, there is still a great deal of difference between the debt transgressors and those nations that are perceived to be safe havens. Now that you've looked at all of these charts, what do you
the odds are that Europe will survive in its current incarnation? My suspicion is that the union of the unequals is doomed.

We
are all quite aware that we are living in an ultra-low interest rate
environment thanks, in large part, to the creative efforts of the world's
central bankers. This environment was created in response to the near
collapse of the world's economy during the Great Recession and has been carried
forward into the third year of the so-called "recovery" as a
desperate means of stimulating a rather sick world economy back to health. Thus
far, the response of the world's economy to all of this cheap credit has been a
resounding and reverberating "Meh".

Just
so we can get a sense of how low interest rates really are compared to historic
norms, here is a graph showing the benchmark interest rate for the United States since 1972:

Here
is a graph showing the benchmark interest rate for the United Kingdom since 1972:

And,
finally, here is a graph showing the benchmark interest rate for Canada since 1990:

While
the central bankers of the so-called "developed nations" ponder why
the world's economy seems so unresponsive to all of their machinations, there may be
an explanation. While this particular posting pertains to details about the issue in one nation, the same cause-effect relationship applies to all nations that are currently experiencing near-zero interest rates.

UHY
Hacker Young, a United Kingdom-based accounting firm, has released a study showing that low interest rates are
responsible, in part, for damaging the economy. UHY estimates that the
combination of high inflation (a United Kingdom Retail Price Index (inflation
rate) of 3.5 percent) in combination with near-zero interest rates on savings
and current accounts has resulted a decline in the value of the nation's
savings. UHY estimates that U.K. savers are losing nearly £18 billion
per year as inflation erodes the value of their savings, even on higher interest savings
accounts and longer-term locked-in investments. While I realize that this data is specific to the United Kingdom, the same issue faces savers in Canada, the United States and other nations where interest rates are at or near historic lows.

The
Bank of England reveals that over £115 billion is currently deposited in U.K.
bank accounts that are yielding zero percent interest. To put this number into
perspective, these savings work out to just over 7.5 percent of the United
Kingdom's GDP for 2011. Since smaller investors experienced frightful capital
losses during the stock market collapse of 2008 - 2009, many retirees, in
particular, are cautious about seeking the higher returns that could be available by
investing in equities. Many would prefer to see their real net worth drop as
inflation slowly eats away at their nest egg rather than to suffer from the sudden
shock of a cliff-like decline in the stock market. Despite historically low
returns on savings, the United Kingdom household savings ratio was 7.7 percent in the fourth
quarter of 2011 and 7.4 percent for all of 2011, up from 7.2 percent in 2010.

With
no return on relatively risk-free savings, savers are much more likely to spend
less. Since much of the developed world's economies relies on consumer
spending for continued growth, cutbacks in household spending on all of those
wonderful toys and other non-essential items will be curtailed, ultimately
having an impact on economic growth around the world. This is a prime example of the law of unintended consequences; central bank actions may actually be hurting the economy rather than helping it.

Thanks to QE, banks around the developed world are getting
away with paying savers very little or nothing for their savings, generally
offering rates that are well below the rate of inflation. This means that
your savings today are worth less in the future as inflation quickly eats up
any investment income. On the upside for the ruling class, extremely low interest
rates mean that governments around the world can continue to spend far more
than what they are bringing in because the interest owing on their debt is not
punitive....at least, not yet.

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About Me

I have been an avid follower of the world's political and economic scene since the great gold rush of 1979 - 1980 when it seemed that the world's economic system was on the verge of collapse. I am most concerned about the mounting level of government debt and the lack of political will to solve the problem. Actions need to be taken sooner rather than later when demographic issues will make solutions far more difficult. As a geoscientist, I am also concerned about the world's energy future; as we reach peak cheap oil, we need to find viable long-term solutions to what will ultimately become a supply-demand imbalance.